Hearing of the Contracting and Infrastructure Subcommittee of the House Small Business Committee - Opening Statement of Rep. Stauber, Hearing on "Oversight of the Women-Owned Small Business Program."

Hearing

Thank you, Mr. Chairman. The federal government recognizes a longstanding policy that the government should aid, counsel, assist, and protect the interests of small business concerns and that the Small Business Administration, along with other federal agencies, do their utmost to promote this directive.

To increase competition and encourage a diverse makeup of small businesses participating in the federal marketplace, the Small Business Administration manages a variety of procurement programs that are exclusive to small businesses. These small business programs allow a protective space for small entities to flourish and thrive so that they may later rise to compete in the open market. Among these programs is the women-owned small business program, designed specifically to encourage growth in industries where women-owned small businesses are underrepresented.

The purpose of the program is a noble one, however in order to ensure that the goals of the program are fully realized, the federal government must make certain the integrity of the program is intact. Unfortunately, government watchdogs have discovered that this may not be the case. The Government Accountability Office and the SBA Office of Inspector General identified several deficiencies in SBA's oversight of the women-owned small business program.

First, the SBA significantly delayed adoption of two of the three critical changes to the women-owned small business program that were mandated by the fiscal year 2015 National Defense Authorization Act. The GAO pointed out that the SBA's enactment of the sole-source authority without implementing the front-end certification program or eliminating the self-certification option may have exacerbated SBA's existing oversight deficiencies. Given that the law was passed nearly four years ago and the SBA just issued its proposed rule for the remaining changes two days ago, this egregious delay cannot be overstated.

Let me be clear, the issuance of the proposed rule on May 14th does not absolve the SBA. The will of Congress was clear, and the SBA's postponement is inexcusable.

Furthermore, the GAO found that the SBA does not have adequate procedures in place to regularly monitor and assess the performance of third-party certifiers. This includes a lack of consistent compliance reviews and regular utilization of certifiers' monthly reports. This lack of oversight may create situations where ineligible or fraudulent firms participate in the women-owned small business program.

The GAO also found that the agency conducted few examinations assessing a firm's eligibility in the women-owned small business program and lacked a mechanism for evaluating its findings. This limits the agency's ability to detect and prevent potential fraud. The SBA continues to rely heavily on competitors utilizing the protest process to identify potential fraud, as opposed to actively rooting out ineligible firms themselves, which is inadequate to protect the integrity of the women-owned small business program.

Lastly, the GAO concurred with a previous SBA Office of Inspector General report that women-owned small business set-aside contracts were awarded using improper industry codes. Unfortunately, the agency seems to take this matter lightly, stating that the issue has a minimal impact on the program's purpose.

While there are numerous deficiencies in the program, stakeholders did note positive aspects, specifically that the program offers greater opportunities for women-owned small businesses. Today, I hope to understand the reasons why the SBA has not resolved its weaknesses and work with the Administration to ensure that the program is operating efficiently, effectively, and with the utmost integrity moving forward.

Thank you Mr. Chairman, I yield back.

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